If you want to know how to build a
successful fast-growing business in the 21st century then Wonga is a
shining example. Its astute use of publicity, social media and
technology is seriously impressive.

Ready cash: Wonga may be fast-growing and innovative, but it also adds yet more personal debt to Britain's pile.

Unfortunately, its business happens to be selling high-interest loans to a debt-soaked nation.

The
last thing Britain and its £1.4trillion personal debt mountain needs is
for one of its brightest new firms to be one that offers quick fix
loans in the privacy of the internet.

Thanks
to the financial regulations requiring that it publishes a
representative APR (annual percentage rate), Wonga's interest rates look
horrendous. Its representative APR is an eye-watering 4,214 per cent.

This
is because it offers short-term loans, charging 1 per cent per day
interest, whereas APR is a measure designed for longer term debt. The
compounding effect of pushing Wonga's short-term debts into a long-term
measure leads to the huge APR figure.

In
its defence, Wonga points out that as loans typically last up to 31
days, the APR is not relevant and its clear explanation of how much you
will have to pay back is more important - and there is some truth in
this.

But Wonga is hardly your friend, as that £46m profit off £185m revenue shows.

Wonga's
big promotion tool is that it can get you money fast, make a swift
decision on lending and it uses playful and cheeky character advertising
to convince borrowers it is on their side.

Go to its website at 2.30pm today and it would tell you: 'We can deposit up to £400 in your bank account by 14.53 today.'

A helpful slider tool will let you play around with how much you want to borrow and show you how much you will have to pay back.

So, if you are £400 short now and need it for 15 days, you will pay back a total of £465.49. The cost of getting that £400 now rather than waiting for payday is £65.

To
many struggling for ready cash, rates like this from Wonga and other
payday lenders will sound reasonable, but even if you manage to pay it
back in full you will still end up back down the original £400 come
payday and on top of that have an extra £65 shortfall that you can
ill-afford.

On the
other hand, fail to pay the money back and the amount you owe a payday
lender swiftly increases. Meanwhile, any form of easy credit means it is
all too easy to end up in a downward spiral of taking a succession of
loans to cover constant monthly shortfalls, which are being exacerbated
by paying large sums in interest.

This is Money's Tara Evans has also been investigating a disturbingly similar series of Wonga frauds,
some in which people who have never even taken out loans have had their
bank accounts cleaned out by repayments to the lender. A common
complaint of the victims was that they got little help from Wonga in
sorting their problem.

Wonga
may argue that it is a new player challenging the financial industry
status quo, but in the seven years that I have worked at This is Money, I
have seen far too many sad tales of people whose lives have been
blighted by debt and easy credit.

And make no mistake about it, debt and easy credit is what payday lenders deal in.

If
cigarettes and alcohol have strict rules on their advertising, then so
should high interest debt, and payday lenders should have to display a
prominent financial health warning.

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